Fonterra to expand use of SAP

Consumer-branded dairy business will now run on platform

Fonterra will create 30 new jobs for skilled information technology workers installing SAP software at its manufacturing plants. The new investment will see Fonterra adopt SAP to run its consumer-branded dairy business in New Zealand and Australia and to handle its warehousing and the management of its manufacturing operations. The investment is another indication that the technology industry may be returning to normality following a hiatus caused by the economic downturn, when projects were routinely put on hold. Fonterra mostly uses Oracle software in its 24 New Zealand and 60 overseas manufacturing plants, much of which will be replaced. Chief information officer Chris Barendregt says most of the jobs will be created in Auckland and Hamilton, but there may be some flexibility about locations. The co-operative said last week that farmers' payouts for milk solids could exceed $8 a kilogram next year. Mr Barendregt says it is "always good in good times" but that had not affected the decision to give the project the green light, which had been made earlier. The company shelved a plan to move to an all-SAP environment in 2006, saying then that it had concluded it was not a priority for the business. Fonterra had that year completed a wrenching project – estimated to have cost about $120 million – to overhaul its supply chain management systems using SAP software and ditch its mainframe systems. That saw it move to a demand-driven production model and strip out a whole layer of administration. The goal of that initiative – Project Jedi – was to increase efficiency and slash inventories by ensuring the co-operative manufactured dairy products to order, rather than relying on its overseas sales offices to sell what the factories produced. Fonterra also uses SAP software to handle its accounts and human resources. Mr Barendregt says expanding SAP to the consumer-branded dairy and manufacturing areas will further simplify Fonterra's business and make the co-operative more efficient. The project would reduce the risks associated with using software that was now quite old and would provide better information for managers. What had changed since 2006 was that Fonterra was then considering "one big wall-to-wall transformation" of its manufacturing software with a "big sticker" price, he says. It has since worked out ways of breaking up the project into stages and retaining some software that controls equipment at its plants. "We have probably got a slightly different view of the value we can drive out of it as well. What you might consider to be good practice is continually changing." Fonterra expects the information technology project may help lure back some skilled New Zealand expats from overseas.

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